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INVESTMENT LAW
Concepts
Mutual fund
means a fund established in the form of a trust to raise monies through
the sale of units to the public or a section of the public under one or more
schemes for investing in securities including money market instruments
or gold or gold related instruments or real estate assets
Provided that infrastructure debt fund schemes may raise monies
through private placement of units, subject to conditions specified in
these regulations
Money market instruments
includes commercial papers, commercial bills, treasury bills,
Government securities having an unexpired maturity up to one year, call
or notice money, certificate of deposit, usance bills, and any other like
instruments as specified by the Reserve Bank of India from time to time
Sponsor
means any person who, acting alone or in combination with another
body corporate, establishes a mutual fund
Concepts
Custodian
means a person who has been granted a certificate of
registration to carry on the business of custodian of securities
under the Securities and Exchange Board of India (Custodian
of Securities) Regulations, 1996
Asset management company
Manages the mutual fund
Sponsor should have contributed at least 40% of the net worth
of the AMC
Any person holding 40% or more of the net worth of the AMC
is deemed to be a sponsor and must comply with applicable
regulations
Differences between an AIF and an MF
Item AIF MF
Minimum net worth None INR 50 crores
Minimum corpus INR 20 crores No specific minimum
Structure Trust, company, or LLP Trust
Manager and Can be the same Must be different
sponsor
Fund management At least one member of The fund is managed by the
investment team of the SEBI-registered AMC.
investment manager of an
AIF needs to have at least
five years experience in
advising or managing pools
of capital and has relevant
professional qualification.
Thus, the investment
manager can be an
individual or an entity.
Differences between an AIF and an MF
Item AIF MF
Minimum Minimum investment size for No minimum investment
investment an AIF is INR 1 crore. specified
However, if investors are
employees/directors of the AIF
or employees/directors of the
Manager, then minimum
investment value is reduced to
INR 25 lakh.
Registration 3 categories When registering under the MF
Regulations, the fund must
specify its Trustee/s, Sponsor/s
and AMC
Characteristics 1 and 2 should be closed- Can be either
ended; 3 can be either closed-
or open-ended
Minimum 3 years Not specified
tenure of
scheme
Differences between an AIF and an MF
Item AIF MF
Maximum number of 1000 No ceiling
investors
Trust Deed
For grant of approval of the asset management company the applicant has
to fulfill the following :—
(a) in case the asset management company is an existing asset management company it has
a sound track record, general reputation and fairness in transactions.
Explanation: For the purpose of this clause sound track record shall mean the networth and
the profitability of the asset management company;
The asset management company is a fit and proper person;
(b) the directors of the asset management company are persons having adequate
professional experience in finance and financial services related field and not found guilty of
moral turpitude or convicted of any economic offence or violation of any securities laws;
(c) the key personnel of the asset management company have not been found guilty of
moral turpitude or convicted of economic offence or violation of securities laws or worked
for any asset management company or mutual fund or any intermediary during the period
when its registration has been suspended or cancelled at any time by the Board;
(d) the board of directors of such asset management company has at least fifty per cent
directors, who are not associate of, or associated in any manner with, the sponsor or any of
its subsidiaries or the trustees;
(e) the Chairman of the asset management company is not a trustee of any mutual fund;
(f) the asset management company has a networth of not less than INR 50 crores
Obligations of AMC